[Click e-Stock] "Alphabet to Lead 'Year of AI Shopping' Next Year... Strengthening Ad Business by Securing Traffic"

On December 16, Mirae Asset Securities maintained Alphabet, Google’s parent company, as its top pick in the global AI sector, stating, “In the coming year, as artificial intelligence (AI) shopping becomes commercialized, Google will strengthen its advertising business by securing shopping traffic and expand its business into the payments sector.”

Park Yeonju and Jung Sehun, analysts at Mirae Asset Securities, stated this in a report released the same day, maintaining their ‘Buy’ rating and target price of $432 for Alphabet.

The report projected that while this year was the “year of AI search,” next year will become the “year of AI shopping.” This is not only because the necessary technologies for AI shopping have matured, but also because an increasing number of people are starting to ask AI for shopping advice and make purchases based on its recommendations. According to Bain & Company, as of October this year, 16% of U.S. consumers had received shopping recommendations from ChatGPT, and Adobe noted that consumers who arrived via AI recommendations were increasingly more likely to make purchases compared to those who did not.

As AI meaningfully impacts the core elements of e-commerce-traffic and conversion rates-Google’s response strategy is gaining momentum. Google’s main strategy is to enable users to easily find desired products through conversations with AI, thereby attracting shopping traffic with high purchase intent. In addition, by providing personalized recommendations based on user information and context from Gemini, Google aims to boost conversion rates and further strengthen its advertising business.

Google is also working to expand its business into payments. Through the fully automated ‘agentic checkout’ feature, Google is extending its business scope to payments, while aiming to become a shopping orchestrator that oversees purchases on behalf of users by integrating its open shopping graph and numerous smart partners into the Google platform.

The report noted that AI shopping is highly likely to expand both the overall e-commerce market and the related advertising market. The analysts emphasized, “This is because online shopping is becoming more convenient and personalized, and with the global e-commerce penetration rate at only 26% as of 2024, significant growth is expected.” They added, “In the AI shopping competition, Google’s strengths lie in its pre-tier models capable of securing traffic with purchase intent, its user base, and its vast troves of data.”

In particular, they analyzed, “As the number of Google Gemini users rapidly increases, existing search engine users are likely to migrate, so over time, more consumers will engage in Gemini-powered shopping.” This not only expands Google’s search advertising revenue but also provides a foundation for Google to enter the retail media advertising market currently dominated by Amazon and others.

Furthermore, while other retailers’ product and user information may be limited to their own sites, Google, as an open platform, can amass vast amounts of data. The analysts highlighted that this enables Google to build a flywheel for providing superior AI shopping services, which serves as a key differentiator for the company.